I still haven't seen people change their economic behavior much, if at all.[/QUOTE]
It's starting to change.
[QUOTE]NEW YORK (CNNMoney.com) -- Borrowing by consumers fell in August for the first time in more than 10 years as a weak economy continued to strain household budgets, according to a government report issued Tuesday.
The Federal Reserve reported that consumer borrowing decreased by $7.9 billion in August to $2.577 trillion from a revised $2.585 trillion in July.
The annual rate of consumer borrowing fell 3.7% last month. Credit card borrowing decreased at an annual rate of 0.8% while nonrevolving borrowing, including student and auto loans, contracted by 5.4% in August.
Tuesday's report marks the first time consumer credit has shrunk since January 1998, when it dropped $4.7 billion, or a 4.3% annual rate[/QUOTE]
[QUOTE=BushyTheBeaver;2793212]Yeah but is that a choice made by consumers or simply an indication of banks not lending. It's got to be the latter.[/QUOTE]
Not completely clear. Maybe a bit of both but you're probably right, more the latter. I've heard the banks are aggressively trying to trim their risk exposure on credit cards by lowering limits, closing dormant accounts, etc.
[QUOTE=jetstream23;2793226]Not completely clear. Maybe a bit of both but you're probably right, more the latter. I've heard the banks are aggressively trying to trim their risk exposure on credit cards by lowering limits, closing dormant accounts, etc.[/QUOTE]
You mean risk management? My god, why would a bank ever want to do that? :D
[QUOTE] Fed to lend to companies in emergency move
By JEANNINE AVERSA, AP Economics Writer 32 minutes ago
Frantically trying to stop the bleeding on Wall Street, the Federal Reserve took a first-time step Tuesday to get cash directly to businesses and hinted that interest rates could come down soon. Stocks continued their free fall anyway and hit new five-year lows.
The central bank invoked emergency powers to lend money to companies outside the financial sector and buy up mounds of commercial paper, the short-term debt that firms use to pay for everyday expenses like salaries and supplies.
The Fed, which has only loaned money to banks before, made the move as the gravest financial crisis in decades wore on and concern spread around the world.
In a speech to the National Association for Business Economics, Fed Chairman Ben Bernanke delivered a strong signal interest rates may need to be cut. And he warned the country could be stuck in the economic doldrums for some time.
"The outlook for economic growth has worsened," Bernanke said. "The heightened financial turmoil that we have experienced of late may well lengthen the period of weak economic performance."
The gloomy assessment appeared to open the door wider to an interest rate cut on or before the Fed convenes again Oct. 28. The Fed's key interest rate now stands at 2 percent.
Wall Street turned its back. The Dow Jones industrials lost 508 points, more than 5 percent, to close at 9,447, the lowest since Sept. 30, 2003. The Standard & Poor's 500, a broader stock index, closed below 1,000 for the first time since that same day.
President Bush again sought to strike a reassuring tone and said the nation would make it through an economy blighted by job losses, record foreclosures and shriveled retirement savings. Congress' top budget analyst estimated Tuesday that Americans' retirement plans have lost as much as $2 trillion in 15 months.
"Have faith, this economy is going to recover over time," the president said in a speech in Virginia. "I wish I could snap my fingers and make what happened stop. But that's not the way it works."
Bush reached out to European leaders earlier Tuesday to urge coordination on efforts to solve the crisis. The White House said Bush was open to the idea of a summit.
The contagion has spread overseas. Britain's chief financial regulator was readying a statement to make before markets opened Wednesday, and the BBC reported that the British government was poised to announce a rescue package for the banking system there.
Concerns are mounting that a global recession is developing, and pressure is growing on the U.S. government to do something beyond the $700 billion financial bailout package that Bush signed into law Friday.
To that end, the Fed announced it would begin buying companies' short-term debt. The powers were bestowed during the Depression as part of the Federal Reserve Act.
The government's bailout package is aimed at thawing lending by buying bad mortgage-related debt off the books of troubled financial institutions. The idea is that the banks would then be in a better position to lend and get the economy moving.
Commercial paper borrowing usually ranges from overnight to less than a week. But in the current climate of mistrust, the market has dried up considerably.
The action makes the Fed a crucial source of credit for nonfinancial businesses in addition to commercial banks and investment firms — and also exposes it to risk because so much of the debt would not be backed by collateral.
Credit markets, clenched up for weeks now, relaxed somewhat after the Fed's move.
The Fed said it was creating a new entity to buy two types of short-term debt, known as three-month unsecured and asset-backed commercial paper, directly from eligible companies. It hopes to have the program up and running soon, Fed officials said.
Fed officials said they would buy as much of the debt as necessary to get the market functioning again but refused to say how much that might be. They noted that around $1.3 trillion worth of commercial paper would qualify.
The Treasury Department, which worked with the Fed on the program, said the action was "necessary to prevent substantial disruptions to the financial markets and the economy."
The Treasury will provide money to the Federal Reserve Bank of New York to support the new program, the Fed said. The money would be separate from the $700 billion financial bailout package.
The Fed said it planned to stop buying the short-term debt on April 30 but may extend the program.
There was $1.6 trillion in outstanding commercial paper, seasonally adjusted, on the market as of last week, the most recent data from the Fed. The market has shrunk from $2.2 trillion last summer.
[QUOTE=jetstream23;2792960]It's coming. Whether they want to or not, they'll have to. The faucet is being turned off.
When swiping the card at Banana Republic brings back a "Declined" response...[/QUOTE]
Then why do I keep getting applications for credit cards in the mail? And those blank checks from my credit card co. to spend anyway I please? I've got a good credit rating so apparently I can get more credit if I want!
I'm going to my banker soon to talk about a refi...I'll let you know what he/she says!
As far as that surplus under Clinton? That was more the 'pub congress than his doing...to bad the 'pubs started acting like 'rats!
Yes that is the ticket. It is when fear grips the economy and every one is preching doom and gloom, that is the time to start buying.
I have a order in for Amazon at 55. Sold a hundred shares a month and a half ago for 88. In 2001 after 9/11 I perchased Amazon at 7. Only a hundred shares though. Too bad I did not have more conviction.
I like to bottom feed. I like buying when others are saying the sky is falling. I have learned to stick with the big strong cash king companies in thier respective industries.
I to still get credit card offers and recently took out a credit line for 7500 dollars at zero percent for over a year just a month ago. Basically I will buy stocks with it.
No worries as I am not over extended. So excuse me while I kiss the sky.
I really wanted to protect against a downturn but didn't want to sell my stocks so I simply bought a PUT option on the SPY (S&P 500). A relatively cheap way to insure against a broad market decline. It's up almost 200% since I bought it on Sept. 30th. Still doesn't make up for all the losses I've suffered in GE, Apple, JNJ, etc. but it does take a lot of the sting out.
[QUOTE=jetstream23;2795708]I really wanted to protect against a downturn but didn't want to sell my stocks so I simply bought a PUT option on the SPY (S&P 500). A relatively cheap way to insure against a broad market decline. It's up almost 200% since I bought it on Sept. 30th. Still doesn't make up for all the losses I've suffered in GE, Apple, JNJ, etc. but it does take a lot of the sting out.[/QUOTE]
That sounds good. I will have to read up on PUT options. As I don't know much about them.
It might be a little late to catch things going down now.
In the last week the dow has lost around 800 or more points so that was a good thing you did in hind sight. I will be very surprized if the dow goes below 8000. I know you are talking S&P but all the major indices are so down.
I did not read the posts but to answer the question I think a recession would be even harder to come out of now as we continually deplete the middle class of jobs in this country. Its only going to get worse unless someone does something about it. While China and other nations prosper we will begin to feel the hurt if this trend continues.
The middle class is the engine that runs this country and since those days are slowly coming to a close Im not sure anyone can predict how our country will fair when thrown into a deep recession which is what were heading for. We are treading in uncharted waters and IMHO im not sure its going to work out all too well.